Mystery swirls around a local money manager, as legal action pends against his widow, an influential legislator and a church that possibly benefited from the funds

Sep. 8, 2013

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By the time Scott Michael wrote a $500,000 check to TML Consulting in 2010, he thought he knew the company’s namesake – Thomas M. Lysaght, a Cincinnati money manager – well enough to trust him.

He once lent Lysaght’s church about $200,000 that was repaid on time, with interest. And he’d known the beefy, ponytail-sporting stockbroker for more than a decade, having been a client of Lysaght, whose investment advice usually panned out in paydays.

But those earlier investments had never come close to the half-million he was now handing over to Lysaght’s consulting firm, a business that had been touted in a local magazine cover story as being “engaged in projects in Africa, Europe, Asia and the U.S.”

“He was legitimate,” Michael recently said of Lysaght. “He surrounds himself with the proper people you can check out, and he’s very persuasive.”

He was, anyway. Lysaght died in November 2010, eight months after Michael wrote the check. Lysaght’s estate is now embroiled in both civil and criminal cases filed on behalf of investors who say they were bilked of at least a million dollars $1 million.

This is a story about a man who’s now dead, his pastor wife, their secretive church, their historic Mount Lookout home called the Crusade Castle and an influential state legislator who is either an accomplice or a victim, depending on whom you believe. Because few people are willing to talk on the record about the case for fear of tainting upcoming trials, this story is largely told by documents – property deeds, mortgages, lawsuits and county records.

In July, Ohio and Hamilton County officials took the rare step of filing criminal securities fraud charges against state Rep. Peter Beck, R-Mason, who had for years served as Lysaght’s accountant and as chief financial officer of Christopher Technologies, one of more than a half-dozen businesses started under the Lysaght umbrella. Also charged is John Fussner of Mason, Christopher Technologies’ president.

It marks the first time in at least five years that the county has pursued securities fraud, a crime usually left to federal authorities, who prosecute only higher-dollar cases. Beck has denied wrongdoing and his lawyer says he was a victim, too.

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It’s not the only legal action pending. Lysaght’s widow, Janet Combs, is named as a defendant in a January civil suit filed on behalf of 14 investors who say they were defrauded. Also targeted in the suit is Ark by the River Fellowship Ministry – a church that Lysaght and Combs founded that, according to documents, appears to have directly benefited from investments meant for Lysaght’s various companies.

For example, one day after a $500,000 check from Michael Farms, which is Scott Michael’s company, was made to TML Consulting, Lysaght’s firm, Combs, an authorized signer for TML, wrote a check from its account to Ark by the River for $100,000. TML also funneled $15,700 to Beck’s 2010 campaign committee, the suit alleges.

About the same time, Lysaght wrote a check for $58,300 to Jeff Hauck, a Christopher Technologies investor and church member who, according to the indictment, is the only investor ever repaid. Hauck is also Lysaght’s nephew, according to an obituary that appeared on the website for Geo. H. Rohde & Son Funeral Home in the days after Lysaght’s Nov. 15, 2010, death – meaning that the only repaid investor was apparently a relative.

Founded in 1996, Ark by the River is on a road spotted with churches off Columbia Parkway near Linwood Park. It’s in a quaint, ivy-covered building with a hand-painted sign that announces to passers-by its Sunday services and Tuesday prayer gatherings.

The church has little online footprint – no website beyond a spare Facebook page that has just three “fans.” It’s registered with the IRS as a 501(c)(3), meaning it’s tax exempt, and because it’s listed as a church, it hasn’t been required to file an annual public tax return.

Lysaght was the church’s president; Combs, its pastor. But the church was intimately intertwined with their personal affairs, even owning the couple’s $1 million home on Shattuc Avenue, a historically significant building known as the Crusade Castle, whose history in scenic Mount Lookout dates to the 1850s.

County records show that the home and property at 5100 Shattuc has changed ownership at no cost repeatedly since 2000, when Lysaght first bought it. It has switched hands from Lysaght to the church to Combs and back to the church again. The property has been mortgaged multiple times, sometimes resulting in lawsuits over nonpayment that at least once threatened to end in a sheriff’s sale of its religious-themed belongings.

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Church members aren’t forthcoming. On one recent Sunday, a man who refused to provide a name – saying it “doesn’t matter” – blocked the church’s front doors to a woman and her husband because he said they “weren’t members.” He would not explain how people become members, saying only that the church’s service was private.

Asked whether such exclusivity was appropriate given the church’s tax-exempt status, the man retreated into the church and returned with two more men, the three of whom physically blocked the front entrance to anyone they didn’t recognize.

A similar scene played out on a recent Tuesday evening during a time advertised as a prayer service for the public. (The visitors to the church were the author of this article and her husband, who were barred before getting a chance to introduce themselves.)

The IRS doesn’t require that churches given tax-exempt status have open-door policies, but the agency does investigate situations in which a church’s legitimacy might be called into question.

An IRS spokeswoman declined to say whether the Ark by the River’s status as a church is under investigation, citing a section of the Internal Revenue Code that makes it illegal for IRS employees to discuss private taxpayer information.

Ark by the River has been listed as a co-defendant in several lawsuits over the years. In one, Provident Bank sued the church and Lysaght in 2003 for failure to repay a $50,000 mortgage on the Shattuc property. Fifth Third Bank filed suit over an unpaid $505,500 mortgage the church pulled out in September 2000. A mechanic’s lien in 2004 alleged that the church owed Loveland Excavating nearly $200,000 for work done in the Shattuc area.

Eventually, each suit was resolved with the amount requested paid off in full.

In 2006, R.D. Zande & Associates sued for about $33,000 after the firm – hired to work on a church-owned development project named Castle Bella – claimed it was stiffed.

That development has sparked its own set of lawsuits and investigations.

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Ark by the River plans a housing development

In January 2004, Ark by the River officially entered the real estate game.

With the Fifth Third lawsuit looming for a half-million dollars, the church, through Cincinnati lawyer Martin Mooney, filed Castle Bella’s articles of incorporation with the state.

That spring, two North Carolina women named Sandy and Linda Evans loaned Castle Bella nearly $900,000. The investment was supposed to be paid back with at least 9 percent interest within three years. The repayment never came, the women claimed in a civil suit filed in October 2011. The Evans women allege that Lysaght and Combs used their investment as a personal loan, writing hundreds of thousands of dollars in checks to their church.

In 2006, Combs and her church filed a declaration with Hamilton County stating its plans to create the Castle Bella Homeowners’ Association. Chunks of the Shattuc property were marketed and sold – two plots went to husband-and-wife duos on the same day of November 2008.

County records show that each couple pulled out mortgages in the $280,000 range about the same time they took ownership of the land and began building homes there.

Another plot of land currently is listed for sale at 5116 Shattuc. The property is described in online real estate websites as a 0.64-acre lot with an “amazing panoramic valley view” located “next to a $1M home and the Crusade Castle.” It’s been listed on one website, Zillow.com, for nearly 500 days, with a nearly $200,000 price tag.

Churches by law are allowed to engage in income-producing activities not related to their tax-exempt purposes as long as those activities take a back seat to the organization’s tax-exempt activities. Income from unrelated activities may be subject to the Unrelated Business Income Tax, though a church’s capital gain on real estate is generally subject to the tax only when the gain was financed with borrowed money, another example of church income being shielded from taxation.

Neither Evans woman returned repeated phone calls seeking comment, nor did their lawyer. Their case has been stayed since November 2011 because Combs, through her lawyer, said she is “the subject of a criminal investigation by the Department of Commerce, Division of Securities, Enforcement Section in Columbus, Ohio” for the same issues listed in the Evanses’ lawsuit.

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The Department of Commerce declined to confirm that it was, or say if it still is, investigating Lysaght’s estate or Combs.

“We’re not a party to that civil action and, in general, we’re unable to comment on any ongoing investigations,” said Brian Hoyt, department spokesman.

The only criminal charges filed to date are those against Fussner and Beck, who is chairman of the House Ways and Means Committee. If convicted, Beck could face up to 102 years in prison; Fussner faces up to 43 years.

In that case, the men are accused of knowingly representing Christopher Technologies as being solvent when the company in fact was not.

J. Thomas Hodges, the Cincinnati lawyer representing Michael and 13 other plaintiffs in the civil case, told The Enquirer that “more could be coming down” on the criminal side. Via email, he declined to elaborate while the case is pending.

For the charges to stick, prosecutors will have to show that Beck and Fussner “purposefully engaged in omission,” according to David Meyer, an Ohio lawyer who represents investors but is not connected with this case.

Civil liability isn’t as tough to prove.

Assistant Hamilton County Prosecutor Matthew Broo declined to answer questions about Beck and Fussner’s roles in the alleged scams, citing the pending trial, for which no date is set.

Investment fraud is difficult to prove

Investors affected by the alleged scam are in legal and financial purgatory. The civil suits are basically on hold until the criminal case against Beck and Fussner moves forward.

Hamilton County Prosecutor Joe Deters also declined to be interviewed, instead directing questions to Attorney General Mike DeWine. DeWine’s office directed questions to the Department of Commerce.

Meyer said the silence likely stems from so much being at stake.

Because intent is so key in criminal cases, most allegations tend to result in civil suits only – meaning investors can at most hope for some money back, but not any jail time for the purported scammers.

Michael, who wrote the half-million-dollar check, said he’s now much more conservative. He laments not having done a more thorough background check on Lysaght, which even in 2010 would have turned up some of the lawsuits and liens that could have served as red flags.

“I don’t know why we did it,” Michael said of the investment. “It was during a time when it seemed like we couldn’t do anything right with money except put it in a dead account that didn’t earn any interest.